Chinese retreat relieves bullish pressure on Asia's spot market

Reuters are reporting that Asian spot LNG prices slid this week on improving production and uncertain demand for cargoes in March amid indications that Chinese importers have largely covered their Q1 needs.

Asian spot prices for March delivery fell 10 cents to US$10.40 per mmBtu. Chevron’s Wheatstone project in Australia potentially had surplus supply to offer as well as one or two other exporters.

Plunging temperatures in South Korean capital Seoul could spark additional demand for spot LNG purchases from Kogas as heating needs spike at a time when 11 nuclear reactors are offline.

Indian demand looked healthy. Gail called for a 1 – 17 March delivery via spot tender to counteract delayed production from Dominion Energy’s new Cove Point liquefaction plant in the US.

Other buyers including Indian Oil Corporation and Bharat Petroleum also sought H1 March deliveries. Gujarat State Petroleum closed a tender for a delivery in the first half of February this week.

With snowfall in Tokyo and temperatures forecast below-average until mid-February, Tohoku Electric took a cargo unloading in 18 – 22 March for an estimated US$10.30 per mmBtu.

LNG supply to Japan was disrupted by a partial outage at Petronas’ Bintulu project in Malaysia, where Tohoku is an off-taker.

Petronas substituted lost output with at least one spot purchase, though not from the AP LNG project in Australia as first reported.

Bintulu volumes are lower than usual with the disruption delaying loadings by one to two weeks.

Cheniere Energy’s Sabine Pass facility on the US Gulf Coast restarted exports on 24 January after freezing weather disrupted water supply used in the plant’s turbines, forcing a partial shutdown.

Sliding March prices tightened arbitrage opportunities for traders seeking to transfer LNG from Atlantic to Pacific markets with charter rates fetching about US$78 000 per day.

Several reloads were offered from north-west European terminals to Asian buyers. Organising a shipment within the next week would yield fatter margins as Asian spot prices in early March carry a US$0.70 per mmBtu premium to late March.

On the demand side, Mexico’s CFE tendered to buy four LNG cargoes for delivery across February and March. The tender closed on 25 January.

Argentina sought nine cargoes due between April and June via its first spot tender of the year, closing on 6 February.